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NEC3 ECC: PM assesment of Unliquidated damages under 25.3.

+1 vote
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Can the PM include his own organisations direct cost (accepted that 25.3 is limited to a project level), in his assessment of unliquidated damages, that would not have been incurred had the works been completed by the Key Date?

In a hypothetical scenario….. a Contractor has missed the Key Date due to problems of his own making.

Assuming:

-NEC3 Option C  conditions.
-No inclusion of Secondary Option X7 – Delay Damages.
-X18 - Limitation of liability not active.
-The absence of an instruction of Acceleration (36.3), and the fact that no Compensation Events have been implemented detailing a Change to the Completion Date (63.3), the Completion Date remains unaltered.

Given that:

-There is an obligation to achieve the WBS elements on or before the Key Date (30.1).

-Failure to achieve the Kay Date amounts to a breach of contract (AAA, 30.1).

-The NEC3 included an option for the PM to asses unliquidated damages under 25.3 as NEC2 conditions of reaching agreement or litigation were too rigid. Although the intention of 25.3 recourse is for direct/ project costs only.

-25.3 - If after giving the Contractor opportunity to correct any shortcoming in the work the Project Manager decides that the work does not meet the Condition stated for a Key Date by the date stated and, as a result, the Employer incurs additional cost either
•in carrying out work, or
•by paying an additional amount to Others in carrying out work the additional cost which the Employer has paid or incurs is paid by the Contractor. The Project Manager assesses the additional cost within four weeks of the date when the Condition for the Key Date is met. The Employer’s right to recover the additional cost is his only right in these circumstances.

Considering all of the above,

Can the PM include his own organisations direct cost (accepted that 25.3 is limited to a project level), in his assessment of unliquidated damages, that would not have been incurred had the works been completed by the Key Date?
asked Feb 26, 2015 in NEC3 Main options by anonymous  
reshown Feb 26, 2015 by Glenn Hide
   

1 Answer

+1 vote
25.3 gives a good answer to this question I believe. Unfortunately it is fact sensitive so you must look at the detail of the "hypothetical project".

25.3 provides, in simple terms, that the Employer can recover additional costs caused by the failure to achieve the key date which relate to carrying out work. The PM is not an "Other" so the second bullet is irrelevant.

If there is additional supervision cost on the same project, caused by the failure to meet the key date, that is likely to be recoverable as supervision is "carrying out work". The key factual question will be whether there is, genuinely, additional cost as a result of the failure.
answered Feb 27, 2015 by Rob Horne (9,030 points)